Pick n Pay shows profit growth, despite R250m severance packages payout

Johannesburg - Pick n Pay [JSE:PIK] reported a R15.3bn gross profit increase for the year ended in February 2018, up from R14.5bn in 2017, the group said on Thursday.

Headline earnings were up 7.1% from 258.65 cents to 276.98c per share.

The supermarket group said while the results showed improvement under tight economic conditions, financial performance was affected by the Voluntary Severance Programme (VSP) which paid out R250m in severance packages last year.

“While the cost of the VSP has impacted profits in 2018, the group is confident that the positive impact of the programme, both on sales and profit, will deliver further momentum in the 2019 financial year,” the company said in a statement.

The programme slashed the company’s labour force by around 10% and is expected to streamline operations and reduce costs.

Trading expenses jumped to R15.2bn from R14.2bn in 2017, while trading profit increased by 4.9% to R1.8bn. 

• READ: Pick n Pay profit slumps as retailer forks out for retrenchment plan

The group turnover increased 5.3% to R81.6bn, with the South African operations making the  largest contribution to the growth.

“In this quarter, the group's South African segment delivered sales growth of 8.0%, with like-for-like growth of 5.3%. This was well ahead of the market and was achieved at a time when internal selling price inflation had fallen to just 0.2%,” the company said.

The company said its store card had approved over R1bn in credit since its launch in September, with 56 000 store account holders.

Commenting on the widescale recall of prepared meats affected by the recent Listeria outbreak, Pick n Pay chairperson Gareth Ackerman said the company acted in a responsible manner to provide “certainty and reassurance” to customers.

“We withdrew products from the affected manufacturers immediately. We established that our own products were not affected,” he said.

“We went even further and said that, if customers were concerned, we would take back products which were not affected – without quibble or question.”

Pick n Pay has stores in Botswana, Lesotho, Namibia, Swaziland, Zambia and Zimbabwe.